Business 101 (United Kingdom Edition)
Definition of a Business
The definition of a business in the UK varies depending on who you ask. According to the UK’s Companies Act 2006, a small company is defined as a company which doesn’t have a turnover of more than £6.5 million, a balance-sheet total of more than £3.26 million and doesn’t employ more than 50 employees. Medium-sized companies are companies which have fewer than 250 employees while having a turnover of under £12.9 million.
The private sector definition of SMEs (Small Medium Entity) is a little blurrier. However, they usually define SMEs by the number of employees a business employs as well as the businesses turnover or balance sheet total.
What does business mean in practical terms?
In practical terms, businesses deal in an exchange of goods and services. They’re also involved in numerous transactions and not just in a single operation. It’s also essential to take note of the fact that almost every business in the world engages in business with the sole purpose of earning a profit.
The meaning of business isn’t set in stone. While there are a couple of foundational points, governments, banks, and small business insurance companies cannot agree on how to identify an SME. When these authorities aren’t in agreement as to the meaning of an SME, the definition of business becomes a little blurry.
What are the various types of Businesses?
When it comes to business, the deeper you dig, the more you find. To keep this article concise, let’s take a look at the three major types of businesses. The three primary types of businesses are service businesses, merchandising businesses, and manufacturing businesses.
- Service Businesses – Service businesses provide services to people. Services are also known as intangible products or products which do not possess a physical form. Examples of service businesses include salons, schools, banks, law firms, Business Accountant and so on.
- Merchandising Businesses – Merchandising businesses buy products from wholesalers at wholesale prices. They then resell these products at retail prices. Simply put, they profit by selling products at higher than their purchasing costs. Examples of merchandising businesses include grocery stores, convenience stores, distributors and so on.
- Manufacturing Businesses – Manufacturing businesses buy products to use as materials to manufacture a new product. Manufacturing businesses deal with the transformation of purchased products. Raw material, labour and factory overheads are combined by a manufacturing business to produce a new product. Goods manufactured in this way are then sold to customers.
The fourth type of business exists which is known as a Hybrid Business. Hybrid Businesses refer to businesses which can be classified into more than a single type of business. However, when push comes to shove, hybrid businesses are classified into one of the three types of businesses based on their main business interest.
Number of Businesses in the UK
As per data released by Parliament.uk there were 5.7 million private sector businesses in the UK in 2018. In 2017, there were 27,000 more private sector businesses than there were in 2018. The data shows that the UK has experienced its first year on year fall when it comes to the number of businesses since they began recording the current series of data in 2000.
2018 had more than 2.2 million more businesses than in 2000 which is an increase of 63%. When you look at the data, you will notice that the proportion of businesses with employees has fallen from close to a third in 2000 to around a quarter. The rise of self-employment has led to a decline in the proportion of employers to employees.
There are also many self-employed Accountants in London who have started their businesses & who set their hours, wages and so on.
Five tips before starting a business
If you’re keen on starting a business and are raring to go, have a look at these tips which will put you on the right path.
- Figure out which business works right for you – There are tonnes of opportunities for successful businesses in the world. The thing that you should concern yourself with is finding a need which you can fulfil. It also has to be something that you want to do. The next step would be to figure out the financial aspects of your business for it to be profitable. Hiring a good Business Accountant from the start can set a strong foundation for your business.
- Make sure there are demand and market for your product – Never assume that people will want to buy your product or service before doing your research. Talk to people who aren’t your family or friends and find out if what you’d like to sell is something that they’d want to buy. Don’t just do this with two or three random people. Do this with many prospective buyers after you’ve done your research. A good Accountant in London will be able to help you design a great business plan and also carry out a pricing strategy.
- Plan for success – You don’t need to figure out all the details of your project. However, you do need to set an end-goal. In addition to an end-goal, you also need to figure out what you’ll need to achieve to get there. Think of the things that you’ll need to accomplish as mini-goals. Your plan can change as time flows. However, you need a plan so that you can stay focused and head in the right direction.
- Procrastination is the enemy – Many people will advise you to not move ahead with your plans until you’re sure about every little detail about the business they’d like to start. The problem with this approach is that it results in procrastination. No one ever begins anything knowing all the cards. There will never be a perfect time or situation for you to start your business. The best time was yesterday. The next best time is now. The benefits of being self-employed cannot be enjoyed until tomorrow. You have to struggle today so that you can relax tomorrow because you are responsible for what you earn and how you earn it.
- Don’t go down with your mistakes – Mistakes are all a part of being human. You will make mistakes. No one has built a lucrative business without making massive mistakes. Make sure that you don’t dwell on failure. Pick yourself back up when it happens and move on. Don’t let your failures demoralise you. Every great self-employed businessperson has got there by making a tonne of mistakes.
As any well-seasoned businessperson would tell you, there’s plenty more to business than this. However, this article covers all of the essential basics.
Clear House Accountants are specialist Business Accountants in London who work with a diverse range of businesses, helping them create smart solutions for Accounting, Tax and Growth. Our state-of-the-art tools, smart processes and proficient advisers make sure that your business is prepared for all types of scenarios all the while making sure your business is growing.